China Launches Historic Sale of $138B in Ultra-Long Bonds to Boost Fiscal Spending

According to a report by Bloomberg, China is set to begin selling a first tranche of its 1 trillion yuan ($138 billion) worth of ultra-long special sovereign bonds on Friday. The Central Government intends to issue 300 billion yuan in 20-year bonds, 600 billion yuan in 30-year notes, and 100 billion yuan in 50-year tenor bonds from May to November. The move follows China’s pledge to boost fiscal spending during the National People’s Congress in March, as local authority debt pressures mount. The sale comes after data revealed a decrease in broader credit measures in April. In contrast, provincial governments have increased new bond issuance in recent weeks following a call by top leaders to hasten local bond issuance. The sale is expected to assist in speeding up fiscal expenditure, according to Standard Chartered’s chief economist for Greater China and North Asia, Ding Shuang, who predicts a probable 25-basis-point reduction in banks’ reserve requirement ratios, making it more convenient for a loan prime rate cut. The Financial Times previously disclosed that the People’s Bank of China requested guidance from brokers regarding the pricing of the first tranche of the sovereign bonds.